Bond Investors Prepare for Ongoing Volatility in Market

Bond investors are preparing for continued volatility in the market, abandoning hopes of a return to normality in 2023. Recent double-digit moves in Treasury yields have left traders seeking flexible and nimble investments to navigate the tumultuous market. The market was hit by a surprise cut to global oil production, which led to a fall in bonds, only for them to bounce back again after weak economic data. George Goncalves, head of macro strategy at MUFG, predicts that it may be mid-2024 before rate volatility settles. The uncertainty has led to the ICE BofA MOVE Index reaching its highest level since 2008.

The recent volatility in markets has left traders uncertain about how much financial tightening will replace further rate hikes by the Fed, following disappointing US employment data. In addition, the Fed is expected to cut its funds rate to around 4.30% by year end, lower than its own quarterly economic projections indicate, leading veteran investor Darren Davy to suggest that global fixed-income shifts are likely to take place in the next 12-18 months. Davy has worked in markets for 36 years, and is affiliated with Lee Cooperman’s Omega Family Office.